What Next for New Zealand’s Economy?
“In New Zealand, a country of five million people, new COVID-19 cases have been in the single digits for most of the past week. Australia reported just seven new infections on 23 April. That puts the pair in the very small group of countries that seem to have vanquished the virus, including South Korea and, barring a fresh wave of infections from a recent outbreak on a naval vessel, Taiwan,” The Economist reports in its latest issue.
“In all four places officials caution that life is not going back to normal yet. For one thing, there can be no letting down their guard. The authorities have warned that a second wave of the virus may hit in winter.
“Australia promises ‘aggressive suppression’ using contact-tracing and one of the highest rates of testing in the world. New Zealand is going one step further. It has set itself the goal of eliminating the virus entirely from its shores.
“The benefits of elimination are clear. Whereas many countries risk a debilitating cycle of lockdowns, gradual re-openings and then fresh restrictions as the outbreak waxes and wanes, New Zealand’s Government believes it may soon be able to send Kiwis young and old back to work without fear that the number of cases might start to surge again. ‘The recovery could be smoother and less hampered than in other places,’ economist Shamubeel Eaqub says.
“Yet finding every last case of the virus will be difficult. ‘It’s a needle-in-a-haystack phenomenon,’ says Ayesha Verrall of Otago University. The current random testing of workers in risky jobs, regardless of symptoms, will need to be expanded. Contact-tracing will also need to be made more watertight. Initially, the government had trouble reaching 40 per cent of people it thought might have been exposed to the disease.
“Moreover, elimination will entail the strictest border controls.
“The Government’s economic models assume New Zealand will have to stay closed to foreigners for a year. But some doubt it is feasible, or worthwhile, to keep the borders sealed. Former finance minister Steven Joyce says eliminating the virus is ‘pie in the sky’.
“Even if elimination succeeds, many big industries in New Zealand cannot hope to return to normal. A halt to international tourism, most notably, will knock about 5 per cent off GDP and put some 100,000 people out of work. Border closures will hit farmers, too. Each year New Zealand and Australia bring in hundreds of thousands of backpackers and seasonal workers to pick fruit and prune grape vines. With borders closed, wineries and farms are short-staffed.
“Yet New Zealand’s elimination plan has widespread public support. A poll in early April found that 84 per cent of New Zealanders approve of the Government’s response to the pandemic – 30 percentage points higher than the average in the G7. There is even hope that other countries may be able to join its putative virus-free zone. The Deputy Prime Minister, Winston Peters, has raised the prospect of a ‘trans-Tasman bubble’ once both Australia and New Zealand have the virus tightly under control. That could also include some Pacific countries – provided it does not burst.”
Original article by The Economist, April 23, 2020.
Photo by Casey Horner.